Energy giant Shell (NYSE:SHEL) is snapping up Singapore’s Pavilion Energy from a subsidiary of Temasek. Pavilion is a leading LNG (Liquefied Natural Gas) trader with a contracted supply volume of around 6.5 MTPA (Million Tonnes Per Annum).
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The Deal
Pavilion’s energy operations encompass LNG trading, shipping, supply of natural gas, and marketing activities in Asia and Europe. This transaction is expected to boost Shell’s position in LNG, adding substantial volumes to the company’s global portfolio. While further transaction details remain under wraps, Shell noted that the deal offers an attractive internal rate of return and aligns with the company’s goal of achieving a 15%-25% increase in its purchased volumes. Shell expects the acquisition to close in Q1 2025.
Shell’s LNG Focus and the Bigger Picture
Importantly, Shell foresees LNG playing a pivotal role in the world’s energy transition and shift away from coal. Over the long term, Shell aims to increase its LNG business by 20%-30% by 2030. It also holds the first LNG importing license to Singapore and currently supplies nearly 25% of Singapore’s natural gas needs.
Moreover, Shell is already the largest LNG player globally. According to Bloomberg, the company’s LNG sales stood at 67 million tons last year. Other leading energy players are also looking to cash in on the global LNG opportunity. Last week, Saudi Aramco signed a 20-year LNG supply deal with NextDecade (NASDAQ:NEXT).
Is SHEL a Buy, Sell, or Hold?
Shell’s share price has rallied by nearly 20% over the past year. Overall, the Street has a Strong Buy consensus rating on the stock, alongside an average SHEL price target of $90.33.
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